Crenshaw Plaza developer bets on the potential of urban malls

Ken Lombard, who partnered with Magic Johnson to open a theater at the Baldwin Hills shopping center 17 years ago, returns to oversee a $35-million transformation.

“What’s important to achieving success is never underestimating the sophistication of the customer base,” developer Ken Lombard says. Lombard, seen last month in front of the Rave Cinemas at Baldwin Hills Crenshaw Plaza, has overseen a three-year, $35-million upgrade to the mall. (Ricardo DeAratanha, Los Angeles Times / May 18, 2012) By Roger Vincent, Los Angeles Times

June 14, 2012 Not long ago, the maintenance and security teams from the Baldwin Hills Crenshaw Plaza took a field trip to the glitzy Grove in the Fairfax district. Their leader and tour guide, Ken Lombard, pointed out the clean walkways, expertly trimmed shrubbery and neatly uniformed security guards. Lombard said he expected no less from his staff at Crenshaw Plaza, where his company is wrapping up a three-year, $35-million upgrade that includes a new food court, 15-screen theater complex and other improvements. “I wanted them to see the quality level I expected,” Lombard said. “The consumer wasn’t coming here anymore,” he added, referring to Crenshaw Plaza. “But give people a safe, comfortable experience and they would rather go five minutes away than 25.” Lombard, 57, is among a new wave of developers who believes shopping centers can thrive in urban centers if they offer a compelling mix of stores and don’t try to cut corners. It’s the same game plan Lombard used with his former partner, Lakers great Magic Johnson, when they opened the groundbreaking Magic Johnson Theaters at Crenshaw Plaza 17 years ago. The pair went on to strike a deal with Starbucks to franchise 125 “Magic Johnson” coffeehouses, which led Starbucks Chief Executive Howard Shultz to recruit Lombard as the chain’s president of music and entertainment, a job he held from 2004 to 2008. Lombard left the Seattle retailer for an ownership stake in Capri Capital Partners, where he has overseen $200 million in real estate investments in the last 10 months, including apartments in downtown San Jose and Seattle and the North Bethesda Market residential and retail complex in Maryland. None is more dear to Lombard than Crenshaw Plaza, the big indoor mall that Chicago-based Capri bought for $136 million in 2006. At that time, the 1980s-vintage center was something of a fixer-upper, peppered with vacancies and forgettable stores. The main anchors, Macy’s and Wal-Mart, were both considering bailing out, and some of the clientele were causing trouble. “Ten or 15 years ago we had a lot of roughnecks coming through,” GNC store owner Sonia Robinson said. “Gangbangers would come in and take stuff from your store and think it was theirs.” Lombard saw the potential. Despite some nearby areas with reputations for higher crime, the mall is also a shopping destination for solidly middle-class neighborhoods such as Baldwin Hills, View Park and Ladera Heights. “What’s important to achieving success is never underestimating the sophistication of the customer base,” Lombard said. “You have to really understand the types of uses people are willing to support.” It was a lesson Lombard said he learned as a youngster in Seattle, where he cleaned toilets and performed other menial tasks in his grandfather’s dry cleaning store before being given more serious responsibilities as he matured. The shop lay between a wealthy neighborhood and a poorer one, and there were parts of the city Lombard felt he couldn’t visit as an African American, but he took to heart his grandfather’s philosophy of giving all patrons quality service. “We served high and low customers,” Lombard said. “We did the best we could, with no preference.” After graduating from the University of Washington, where the 6-foot-6 Lombard was a “very skinny forward” on the Huskies basketball team, he sold office equipment for IBM. Later he became an investment banker focused on commercial properties, and went on to arrange funding for minority entrepreneurs. If he has any downtime, he’s likely on a golf course. Lombard, who lives in Hidden Hills with his wife, KCBS-TV Channel 2 news anchor Pat Harvey, plays locally at the Spanish Hills and Braemar country clubs, where he is a member. “You get to turn off your brain and spend a few hours with a good friend,” he said. “I try to keep it social.” Lombard’s association with the 860,000-square-foot Baldwin Hills Crenshaw Plaza dates to 1995, when he helped Johnson open the theaters. The men sold their ownership stakes in 2004, and as the years passed the theaters became run-down and obsolete. In 2010, Capri, with Lombard at the helm, launched a makeover of the former Magic cinemas as a cornerstone of its upgrade of the mall, at Martin Luther King Jr. and Crenshaw boulevards. His strategy started with aesthetics. Capri tore out some of the interior walls and pillars to improve visibility and enhance a sense of openness. Skylights and recessed light fixtures were added to brighten the mall, and new white tile floors were laid. The food court was completely rebuilt. In other cases, Lombard wasn’t afraid to get tough. When AMC Entertainment Inc. wanted to renew its theater lease in 2010, it offered to lay new carpet, reupholster the seats and repaint. Lombard wanted much more, but AMC balked. Lombard let the lease expire and found another operator. Rave Motion Pictures, a small theater chain from Dallas that competes in the upscale market, performed a $10-million upgrade mostly funded by Capri. The mall’s Rave Cinemas now has 15 theaters with stadium seating and digital technology that can project in 3-D and bring in broadcasts of live events. It’s been among the top 100-grossing theaters in the country when showing family fare since it opened last July, Rave Cinemas President Rolando Rodriguez said. Building a top-flight cinema complex was a cornerstone of Lombard’s plan to raise the mall from a C grade to an A level. Another key was to bring in a restaurant that could compete with the region’s best. In January, Post & Beam opened to warm reviews. Celebrity chef Govind Armstrong’s California comfort food is a selling tool for Lombard. He takes retailers he’s wooing on a drive of the neighborhoods served by Baldwin Hills Crenshaw Plaza and then finishes his pitch at Post & Beam to demonstrate that the mall is on the upswing and other retailers have already invested. “Very few want to be the first one out of the gate,” Lombard said. Macy’s took the plunge with a multimillion-dollar upgrade of its store at the mall. Wal-Mart is also remodeling its store, and adding fresh groceries, crafts and fabrics, as well as an expanded apparel section, store manager Synetria Peterson said. Lombard’s strategy calls for mixing established chain stores with up-and-comers. Most mall operators don’t like the headaches of ferreting out small businesses with big potential, and their investors prefer the security of signing well-known brands with proven ability to pay the rent — that’s why so many shopping centers seem to have the same tenants. Another tactic to differentiate the mall is to host events that appeal to the nearby community, such as jazz concerts and a weekly farmers market. Annual sales per square foot, a common measure of shopping center performance, were less than $300 before the makeover, well below the recent national average of $466. Now they average more than $350, and Lombard said he expects sales will climb well over $400 a square foot in the years ahead. Lombard hopes to turn his attention next to Marlton Square, a failed mall and office complex across the street from Crenshaw Plaza that has been decaying for decades and was often a magnet for crime. Much of it is now rubble, dirt and broken asphalt. The property has been taken back by its largest investor, and Capri is among several developers vying for development rights. “We hope we will be fortunate enough to be designated as the developers of Marlton Square,” Lombard said. “I just don’t feel that anyone else can approach the level of understanding we have.”